2015-12-23

The Wall Street Journal weighs in on the benefits of the WTO decision to scrap agricultural export subsidies.

The World Trade Organization agreed at a meeting in Nairobi on Saturday to eliminate some $15 billion of subsidies on exported produce from milk to sugar and rice.

Farmers from countries like New Zealand, Australia and Canada, who get relatively limited help from their governments, cheered the move, which should make their produce more competitive in global markets.

Yet those farmers who receive more generous subsidies—a costly practice often criticized for manipulating prices—could lose their edge. Some of the biggest beneficiaries have been both in developed and developing countries including Switzerland, India and Thailand.

“The decision tackles the issue once and for all,” said Director-General Roberto Azevêdo in a speech following the decision. “It removes the distortions that these subsidies cause in agriculture markets.”

It means that Canadian farmers in most industries just became more profitable. While Canadian consumers benefitted from the huge agricultural subsidies in other countries (think about it: your food was cheaper than it otherwise could have been and you didn't have to pay a dime: a French taxpayer was paying part of the cost of your breakfast), producers were always fighting an uphill battle, trying to be more efficient than a European farmer who could sell at a loss and just get his government to top up the difference.

There's still a long way to go, of course. Unlike that French taxpayer subsidy, Canadian taxpayers still subsidize farms: particularly in the specific industries not covered by the W.T.O. policy.

Which leads us to commenter Curtis Vaughan, who asked:

The Canadian dairy industry is heavily subsidized. You lost me there.....credibility gone

Dairy, of course, is heavily subsidized and protected through import restrictions (not covered by the WTO agreement) and supply management (not covered by the WTO agreement).

Like I said, much work to be done. But a positive step.

The agreement requires developed countries to eliminate subsidies starting Jan. 1, with the exception of some dairy, pork and processed products. Developing countries have until the end of 2018.

Export subsidies include any form of financial aid or support given by a government to a firm involved in exporting agricultural products.